Oct. 8 (Bloomberg) -- Foxconn Technology Group, the
assembler of Apple Inc. iPhones, had to stop production for the
second time in as many weeks after factory-line workers at one
of its plants protested against increased pressure.

Foxconn employs more than 1 million workers in China and
has suffered in the past three years from suicides, riots and
strikes. To improve working conditions, Chairman Terry Gou
raised pay and allowed inspections by outside observers. The
employees, who work as many as 12 hours a day, say the
difficulties of meeting Apple’s demands for quality and abuse
from guards set off the latest incidents.

One of the company’s factories in Zhengzhou, China, lost
two shifts on Oct. 5 after workers became frustrated trying to
prevent scratching on the casings of the iPhone 5, according to
two people familiar with the matter. A dispute occurred between
the production and quality teams at the factory, the company
said. Some 3,000 to 4,000 people who walked off the job at the
plant, have since returned to work, according to advocacy group
China Labor Watch.

“What happens in Foxconn’s factories shows that it needs
to improve working conditions and its handling of worker
relations,” said Wang Xiangqian, former professor at the China
Institute of Industrial Relations who helps the government
coordinate labor relations. “Foxconn may have put more focus on
efficiency and discipline, which is not wrong, and may have
overlooked employees’ feelings as human beings.”

Employees were made to work through a holiday week and
subject to “overly strict” product-quality demands without
adequate training, China Labor Watch said in a press release
dated Oct. 5. The walkout was the result of demands placed by
Apple on its manufacturer to improve the quality of the iPhone 5
after customers complained that the company’s latest handset had
scratches, it said.

Steve Dowling, a spokesman for Apple, declined to comment
on the stoppages at the Zhengzhou plant. Foxconn confirmed
incidents occurred Oct. 1 and Oct. 2, and declined to comment on
the events Oct. 5.

“These were isolated incidents and were immediately
addressed and measures taken, including providing additional
staff for the lines in question,” the company said in an e-mailed statement about the earlier events.

Last month, a brawl involving 2,000 workers at a Foxconn
plant in northern China’s Taiyuan last month halted production.
The fracas left more than 40 hospitalized and brought security
teams wearing riot helmets and wielding plastic shields into the
Taiyuan plant, which employs 79,000 people.

Designed in California

Cupertino, California-based Apple designs its products in
the U.S. and relies on Foxconn to manufacture them in mass and
on time. Apple, the world’s most valuable company, sold 5
million iPhone 5 models in its first three days on sale last
month. The pressure to deliver is felt by the workers.

“Every job is tagged to time, there are targets on how
many things must be completed within an hour,” said Xie
Xiaogang, 22, who worked at Foxconn’s Shenzhen plant and was
transferred to Taiyuan in June this year. “You don’t have much
time to relax. In this environment, many people cannot take
it.”

That entails a steady turnover of workers who need to be
replaced. The requirements to be a Foxconn worker are minimal,
said a recruiter lingering outside the Taiyuan facility’s gates
to coax passers-by and people alighting at the bus stop to sign
up for employment. The minimum age requirement is 16, good
health and some secondary school education, according to Hao
Yaya, a 22-year-old recruiter who has been on the job for a year.

“Blind Eye”

“We’re looking for people willing to work,” he said. With
some workers leaving after a day’s experience, turnover rates
are high and that necessitates constant recruitment, Hao said.
There are signs seeking workers at various shop fronts near the
Taiyuan factory, and fliers are stuck on lamp posts around the
area to entice people to work at Foxconn.

Foxconn has also improved the working conditions of its
employees after at least 10 suicides in 2010.

Apple Chief Executive Officer Tim Cook brought his company
into the Washington-based Fair Labor Association in January,
leading to the inspections, after the suicides highlighted
conditions at the supplier. Cook has pledged not to turn a
“blind eye” to problems in a supply chain that includes
competitor Samsung Electronics Co. The group’s other members
include Nestle SA and Nike Inc.

Foxconn’s Measures

In August, the FLA said Foxconn had cut working hours and
improved safety at a faster pace than scheduled. The changes are
among 284 made by Foxconn this year after audits at three plants
of the Taiwan-based company logged more than 50 breaches of
Chinese regulations, the group said.

Foxconn is ahead of its 15-month schedule for upgrading
conditions and meeting FLA mandates, with 76 more items due for
completion by July 1, the group said.

“Ever since the suicides at the Shenzhen plant threw the
spotlight on that facility, Foxconn has done a lot of effort to
improve the situation there,” said Geoffrey Crothall, a
director at rights group China Labor Bulletin. “Shenzhen is
very much a flagship facility, yet they’re simply recreating the
old management style and problems in other places, such as
Taiyuan, where workers are required simply to obey their
managers without question.”

Workers in Taiyuan say they live in crowded dormitories,
some without air conditioning, there are not enough face masks
on the assembly line to protect against fumes and they have very
strict supervisors.

No Freedom

“We don’t have much freedom, we can’t come and go as we
like, even if we have done all our work,” said Zhang Penghui,
26, who has worked at the Taiyuan plant for four months. “The
rules don’t seem reasonable. The top management might have the
right idea, but by the time it comes down to our supervisors,
things have changed.”

The workers also generally earn less than they would at
auto manufacturers. The base salary at Foxconn in Taiyuan is
about 1,800 yuan ($285) per month, with workers able to almost
double that amount through overtime work and bonuses, according
to Hao.

In contrast, BYD Co., the Chinese carmaker backed by Warren
Buffett, pays its 69,000 employees an average of 2,366 yuan a
month, according to its latest annual report. At Guangzhou
Automobile Group Co. the figure is 2,298 yuan, according to its
annual report.

Among the 120,924 job openings at automakers in China, 58
percent offered a monthly salary of 2,000 yuan to 4,000 yuan,
with almost half of those fetching between 3,000 and 4,000 yuan
a month, according to job592.com, a recruiting website.

Automotive Factories

“Qualifications to work at auto factories are higher than
that at Foxconn in general and that’s reflected in auto factory
workers’ compensation,” said Johnny Wong, an analyst at Yuanta
Securities Co. in Hong Kong. “Assembly workers at Foxconn are
doing the exactly same kind of movement every second, while
their counterparts at auto assemblies do more complicated work
and enjoy more freedom.”

The higher pay does not buy carmakers complete labor peace.
Honda Motor Co. closed two plants in Guangzhou, Guangdong
province, in May 2010. It also shut factories in Guangzhou and
Wuhan, Hubei province, on May 26 after 1,850 workers at a parts-making unit went on strike to seek higher wages.

Foxconn margins place constraints on wage increases. Hon
Hai had an operating margin of 1.1 percent in the year ended
December, according to data compiled by Bloomberg. In contrast,
Apple had an operating margin of 31 percent in the fiscal year
ended September 2011.

“These strikes might send a signal to Apple that it has to
set aside a bigger portion of its profit to satisfying these
assembly plant workers,” said Daniel Chang, an analyst with
Macquarie Securities Ltd. in Taipei. “Apple needs Foxconn as
it’s the only company out there that has the capacity and
ability to amass such a big number of workers to do assembling
work. For Apple, Foxconn is pretty much irreplaceable.”